We often hear the term 'day trading' today but just what is day trading?
In very simple terms a day trader buys and sells with a very short investment horizon which is typically measured in minutes with trading positions being opened and closed within the same trading day. Day trading is particularly suited to high volume, volatile markets such as the forex but is certainly not limited to currency trading. It is for example very commonly seen in the equity markets, although it tends to be seen on the more volatile exchanges such as the NASDAQ, rather than the NYSE or AMEX.
The principle is simply to spot an opportunity and then profit from it quickly getting in and out of the market with just enough time to make your profit and too little time to risk the market turning against you. For example, you might open a position at 11:00 am and close it out just a few minutes later at 11:07 am to take a small but quick profit and repeat this process as many as a hundred times in a single trading session.
Today this traditional definition has been widened somewhat and we now also refer to the practice of trading from home through an online broker as day trading. And, just to complicate matters, the term 'swing trading' has also started to appear recently to refer to traders with a slightly longer investment horizon of anywhere from one to five days.
Day trading in its truest form (buying and selling with a very short investment horizon) is a risky business and is not something which you should try unless you know exactly what you are doing as, while it can be very profitable, it can also produce very large losses very quickly.
Although we talk about 'investment horizons' it also needs to be understood that day trading is not the same as investing and you will be working to very short timeframes during which you will need to be glued to your computer screen jumping onto the wave of a trade as it gains momentum and the jumping off as it crests in order to ride the next wave. Spotting the waves as they roll in and knowing just when to jump on and jump off requires both skill and practice.
For those who enjoy the excitement of the roller coaster ride then day trading can be both exciting and profitable but it is not something for the novice forex trader and should only be contemplated once you have cut your teeth in the world of currency trading and gained a fair amount of experience.
Posted by forex14 at 10:08 AM 0 comments Links to this post
How To Make Money In Foreign Exchange
The foreign exchange market is the world's largest trading market in which world currencies can be sold and bought and, while it has been in existence for many years, the market that we see now has been born out of substantial changes which took place in the 1970s when floating currencies and free exchange rates came into play.
There is no particular 'home' for the forex market and trading can be made from just about anywhere in the world, including using your own home computer. The trading market is also essentially open day and night because as the market is closing in one country the market in another country on the other side of the globe is opening. This means that you can trade at whatever time suits you whether it is during the afternoon or in the middle of the night. There will always be somebody somewhere who is happy to do business with you.
The secret when it comes to making money in foreign exchange trading is to start by learning the basics of the business and this means locating a high quality forex training course. It is not all that difficult to make money with foreign exchange, although you will certainly lose your shirt if you do not know what you are doing. Therefore, you must take the time necessary to learn what to do before you start and then must ensure that you spend a little bit of time working through a dummy trading account before you start trading with your own money.
When you do begin live trading start slowly and stay away from day trading until you are sure of your ground as this particular section of the market can be especially volatile and is influenced by numerous outside factors. As well, set yourself strict trading limits and do not go outside them. Put another way, do not trade with money that you cannot afford to lose because, while you will definitely make money, you will also encounter your fair share of loses while you get the hang of things.
And finally, ensure that you are using the best trading software available and do not be afraid to ask other people for help when you find that your are stuck!
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